What is the SEC Whistleblower Law?

In cases of fraud within the financial services industry, whistleblower protection is provided by the Dodd-Frank Wall Street Reform and Consumer Protection Act, commonly referred to as the Securities Exchange Commission (SEC) Whistleblower Law. This is a federal statute signed into law by President Obama on July 12, 2010. It represented a major change in the American financial regulatory environment, and affects almost every aspect of the nation’s financial services industry.

The SEC Whistleblower Act also gives the SEC powers of enforcement, including a “whistleblower bounty program.” This allows people who provide information that leads to successful SEC enforcement to receive 10 to 30 percent of the monetary sanctions over $1 million.

Additionally, the Act amends the SEC Act of 1934 and the Investment Company Act of 1940 to allow the SEC to not disclose records or information that have been obtained for uses such as “surveillance, risk assessments, or other regulatory and oversight activities.” The only exception is for judicial or congressional inquiry.

The Act was a response to the U.S. financial crisis that included bail-outs of major investment firms and banks, designed to prevent a collapse. It is hoped these new regulations will increase transparency within the financial services industry, protect consumers from investment fraud, and provide tools for managing future financial crises. It also provides international standards for the industry.

The Whistleblower Protection Act of 1989 is a federal law that protects federal whistleblowers who work for the government and report agency misconduct. Employers are forbidden from retaliating against employees because they file complaints. An employee may file a complaint about matters involving violation of a law, rule or regulation; gross mismanagement; gross waste of funds; abuse of authority; or substantial and specific danger to public health or safety.

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